Amazon Web Services Accused of Monopolizing Web Traffic Services

Subspace Omega LLC, the successor to a defunct network optimization startup, has accused Amazon Web Services Inc. of anticompetive behavior over AWS’s discontinuation of a web trafficking agreement between the companies.

Subspace says that after AWS ended the “peering” agreement between the companies, it couldn’t provide adequate optimization services to Epic Games for its flagship game Fortnite, the complaint filed on Nov. 18 in the US District Court for the Western District of Washington says. Peering agreements allow networks to connect at low costs, with greater efficiencies, and lower latency or delay in transmitting information. This is especially important for games like Fortnite because “the longer the distance that data must travel, the higher the cost and latency of the service,” Subspace says.

“Absent peering, it would be necessary to invest significant resources in building additional redundant networks,” Subspace says.

Subspace’s ability to provide services to Epic was impacted by AWS’s decision not to peer since “once a content provider has selected a cloud computing and hosting provider, all inbound and outbound data traffic must be transmitted via that selected network,” and Epic chose AWS for Fortnite. As a result, Subspace couldn’t go through another network to reduce latency.

Shortly after Subspace was “forced out of the market” due to AWS refusing to peer and the cancellation of the Epic contract, AWS began providing those optimization services to Epic, the complaint alleges. AWS declined to comment.

“It has been the specific intent of AWS to eliminate competition within the AWS Network for network optimization services and to replace the services of competitors like Subspace with its own AWS services,” the complaint alleges.

Subspace says that AWS’s refusal to peer was atypical compared to other “settlement-free” agreements it had with network providers like Google, Microsoft, Alibaba, and others where “no money changed hands in either direction.” Instead of peering, AWS gave Subspace its Direct Connect service which doesn’t use region-specific routes to carry internet traffic but offers access to a virtual private cloud.

The startup noted that many AWS customers use more than one of its services and must face high exit fees for removing data from the AWS cloud network.

“Generally the more AWS services employed by AWS’s customers, the ‘stickier the commercial relationship between AWS and its customer,” the complaint says. “AWS therefore has a considerable incentive to expand its commercial relationships with its customers.”

Subspace alleges AWS has 100% of market share for the market for peering to the AWS Network, since it controls the network, and 60% of the market share for network optimization services for gaming applications on the AWS Network.

Major tech companies are trying to carve out stakes in the lucrative cloud computing business. A recent Bloomberg analysis found Amazon.com Inc. has been trying to stymie Microsoft Corp.'s efforts to become a major cloud computing contractor for the government.

In addition to its monopolization and attempted monopolization claims, Subspace alleges tortious interference with its Epic contract, unfair competition in violation of Washington state law, and violation of the Federal Communications Act. Subspace says the FCC recently defined internet traffic through peering as a common carrier telecommunications service. The law requires common carriers to provide service on just and reasonable terms, and Subspace says AWS is a common carrier.

Subspace is asking the court for nearly $417 million in damages, additional damages in treble that amount, and attorneys’ fees.

Subspace is represented by Reynolds Burton and Vinson LLC and Fletcher Heald & Hildreth PLC.

The case is Subspace Omega LLC v. Amazon Web Servs., Inc., W.D. Wash., No. 2:23-cv-01772, complaint filed 11/18/23.